***The following note comes from our Financials team led by Managing Director Josh Steiner. If you aren't yet receiving their work on the space, including their seminal work on the U.S. housing market, please email if you're interested in setting up a trial.***
Our Take: Initial claims fell 28k last week to 339k (but fell 30k after a 2k upward revision to the prior week's data). Rolling claims fell 11.5k WoW to 364k. On a non-seasonally adjusted basis, claims rose 26k. News reports are indicating that one "large" state was excluded from this week's jobless claims report, explaining much of the WoW improvement. It's inclusion next week should see the series revert higher. That said, claims are still trending lower, driven by the seasonality dynamics we've often highlighted (see first chart below for detail).
We follow claims and housing closely. Our basic thesis on capital-intensive Financial Services companies is that credit is always the most important swing factor, and the best leading indicators for credit's frequency and severity components are jobless claims (newly unemployed people are what drive new losses) and home prices (this is the primary collateral, hence it's relevance to severity).
Aside from the seasonality component, which will remain a tailwind through February 2013, we like to cut through the noise by looking at the YoY change in the rolling NSA series. Again, largely attributable to the data anomaly of the missing state, there was a large improvement in YoY rolling NSA. The series improved sequentially from -7.4% to -10.3%.
Joshua Steiner, CFA